Car imports swelling burdening on economy
April 13, 2012
The imports of used cars have been on the rise in the country since the government relaxed the policy in 2011 with the aim to provide cheap cars to the customers in the local market. But unfortunately it was proven wrong for the economy as the imports bills were seen additional burden on it and the prices of reconditioned cars are still higher.
According to the statistics, the country spent Rs 26.396 billion by July to February mainly on the imports of reconditioned cars, which translated into more than 30,000 units.
The imports bill under the expense of cars witnessed growth of 135 percent compared with corresponding months of previous financial year. On the other hand, merely seven thousand units of the cars were imported in the past financial year.
By the end of the current financial year 2011-12, the imports of reconditioned cars might cross 40,000 units and the imports expenses are likely to reach at Rs 30 billion.
In early 2011, the government relaxed the imports policy of used cars from its age three years to five years with incentives of monthly depreciation varies from 1% to 2% and accumulated depreciation from 50% to 60%.
The policy has been exploited on the imports of luxury cars at the expense of foreign exchange, which contributed to ballooning deficit of trade continuously.
The imported cars prices stand high in the retail markets despite majority of the selling brands are three to five years old and overall reconditioned but they had little or no difference in prices compared with locally-made cars having equal engine capacity
Analysts said that the local market has been flooded with used imported cars but their prices are comparatively high if compared with their age.
For Instance, a 3-5 years old Vitz is available between Rs. 0.9 m to 1.1m while its parallel version Suzuki Swift and is traded by local manufacturer almost at the same price. Suzuki Cultus has even lesser prices than Vitz, they said.
They gave another example that a used imported 4-5 years old Daihatsu Mira with an engine capacity of 660 cc depending on condition, is being sold in the local market at Rs. 650,000 to Rs. 700,000 whereas customers could buy brand new locally-made Alto with 1000 cc engine for this much money. Though Suzuki Mehran prices are available at Rs 525,000, which is lowest among them
Similarly, they added, a 3-year-old imported Probox/ Fielder is being sold at Rs. 1,250,000 whereas Pakistani-made same new model XLI is available at around Rs. 1,440,000.
There is no comparison between a locally-made new car and a 5-year-old imported used car as there is no after-sales service for the an imported used car whereas a locally-made new car is provided with warranty along with after-sales service.
There is also no easy supply of spare-parts of used imported cars by the traders but through imports or smuggling whereas local manufactures ensure ample availability of spare-parts of their brands for long years for consumers’ satisfaction.
Hence the locally-made cars popular among the customers, showing the growth of local cars sales despite rising imports. In the first half of the current financial year 2011-12, the local cars witnessed 20 percent year-on-year growth in the country, reaching 81,931 units on reliability and durability.
On the other hand, the imported cars do not generate revenues for the government through duties.
As per taxes and duties on new and used cars, the government secures Rs0.594 million on the trade of a new locally car of 1300cc and above engines whereas its revenues generated through imports of alternate used cars are limited to Rs 0.554 million.
Similarly, a new branded local car of 1,000 cc generates Rs 0.330 million to the government on different accounts of taxes but an imported used cars of same engine capacity results merely Rs 0.198 million earnings to the national kitty, which is 40 percent down from the local brands’ overall taxes money.
As far as revenues on 800 cc car, the revenues generated from local brands are 36 percent high from the reconditioned car. A local car transfers Rs 0.247 million to the government’s account whereas the reconditioned car releases Rs 0.158 million as earnings.
Experts in the auto industry said that an old reconditioned car replaces two cars if we compare Completely Built-up Unit (CBU) with Completely Knocked Down Unit (CKD). Therefore it translates into 100 percent additional revenues through duties and taxes as compared with foreign exchange spent on the imported used cars.
Experts said that the government should review its import cars policy for saving its revenues and foreign exchange along with the protection to the local industry having capacity to exports cars along with demands of local markets.
They said that strengthen of local industry will spell into employments and revenues for the public and the government not only from auto sector but from dozens of allied engineering and manufacturing sectors as well.